How to assess debt sustainability? Some theory and empirical evidence for selected euro area countries

Fincke B, Greiner A (2012)
Applied Economics 44(28): 3717-3724.

Journal Article | Published | English

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Abstract
In this article we elaborate on the test proposed by Bohn (1998) that suggests to study whether the primary surplus relative to Gross Domestic Product (GDP) is a positive function of the public debt to GDP ratio in order to detect whether debt policies are sustainable. We argue that this should be complemented by additional tests for countries with rising debt to GDP ratios. We, then, apply that test to some countries of the euro area. In addition, we perform stationarity tests with respect to the real deficit inclusive of interest payments in order to gain additional insight. We conclude that there is empirical evidence that the chosen paths of fiscal policies are sustainable for the countries we consider, although there are country specific differences in debt policies.
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Fincke B, Greiner A. How to assess debt sustainability? Some theory and empirical evidence for selected euro area countries. Applied Economics. 2012;44(28):3717-3724.
Fincke, B., & Greiner, A. (2012). How to assess debt sustainability? Some theory and empirical evidence for selected euro area countries. Applied Economics, 44(28), 3717-3724.
Fincke, B., and Greiner, A. (2012). How to assess debt sustainability? Some theory and empirical evidence for selected euro area countries. Applied Economics 44, 3717-3724.
Fincke, B., & Greiner, A., 2012. How to assess debt sustainability? Some theory and empirical evidence for selected euro area countries. Applied Economics, 44(28), p 3717-3724.
B. Fincke and A. Greiner, “How to assess debt sustainability? Some theory and empirical evidence for selected euro area countries”, Applied Economics, vol. 44, 2012, pp. 3717-3724.
Fincke, B., Greiner, A.: How to assess debt sustainability? Some theory and empirical evidence for selected euro area countries. Applied Economics. 44, 3717-3724 (2012).
Fincke, Bettina, and Greiner, Alfred. “How to assess debt sustainability? Some theory and empirical evidence for selected euro area countries”. Applied Economics 44.28 (2012): 3717-3724.
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